Synopsys Earnings Preview

Investors never know what to expect for Synopsys (NAS: SNPS) , as it has wavered between topping and missing analysts' estimates during the past fiscal year. The company will unveil its latest earnings on Wednesday, Nov. 30. Synopsys is engaged in the electronic design automation software and related services for semiconductor design companies.

What analysts say:

Buy, sell, or hold?: Analysts are very bullish on this stock, unanimously backing it as a buy. Analysts like Synopsys better than competitor Cadence Design Systems overall. Five out of seven analysts rate Cadence Design Systems a buy compared to seven out of seven for Synopsys. Analysts' rating of Synopsys has stayed constant from three months prior.

Revenue forecasts: On average, analysts predict $390.1 million in revenue this quarter. That would represent a rise of 3.9% from the year-ago quarter.

Wall Street earnings expectations: The average analyst estimate is earnings of $0.45 per share.

What our community says:CAPS All-Stars are solidly behind the stock, with 85.2% assigning it an outperform rating. The community at large backs the All-Stars, with 77.3% granting it a rating of outperform. Fools have embraced Synopsys, though the message boards have been quiet lately, with only 35 posts in the past 30 days. Despite the majority sentiment in favor of Synopsys, the stock has a middling CAPS rating of three out of five stars.

Management:Synopsys' profit has risen year over year by an average of 26% over the past five quarters. The company's gross margin shrank by 2.1 percentage points in the last quarter. Revenue rose 14.8% while cost of sales rose 27% to $84.7 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q3

Q2

Q1

Q4

Gross Margin

78.1%

78.1%

76.9%

78.8%

Operating Margin

15%

13.1%

12.8%

8.9%

Net Margin

13.5%

20.6%

13.2%

6.8%

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